Democratic Leaders Call for Action on Renewable Energy Tax Credits

Senate Minority Leader Harry Reid (D – Nev.) has vowed to fix a tax glitch in the recent omnibus spending bill that, while lifting the ban on crude oil exports, also contained the extension of a tax credit that applied specifically to solar Investment Tax Credit (ITC, Section 48) and wind Production Tax Credit (PTC, Section 45). House Democratic Leader Nancy Pelosi’s (D-CA) has called for fast corrective action as well. Many stakeholders say the five year tax credit extension should have included other renewables like geothermal, but due to rushed negotiations at the end of the year there was miscommunication.

It is unclear whether geothermal and a range of other technologies were accidentally neglected or intentionally left out. For geothermal there is a unique confusion because geothermal technology is listed in both Section 45 and Section 48. Washington sources stated that the possible mistake resulted from a closed-door meeting and from staff working quickly to release the bill in time for a vote before 2016. Besides, there’s little question that wind and solar were the primary focus of negotiations, since they make up more than 90% of the cost to the Treasury, as one observer noted.

What the Congress did complete before adjourning is complicated. Here’s a snapshot: In the final agreement, the Section 45 PTC for geothermal, hydropower and biomass was extended to the end of 2016, and there was no phase out specified. The solar 30% tax investment credit will be available until the end of 2019, with a shrinking value in 2020 and 2021 in a phase-out. The wind PTC is extended at 100% through 2016, then has a shrinking value through 2019 in a phase-out.

The question now is whether when Congress returns next week it will place a priority on Senate Democratic Leader Reid and House Democratic Leader Nancy Pelosi’s calls for adding into the phase-out deals all of Section 45 and 48 technologies. House Ways and Means Committee Chair Kevin Brady (D-TX) has said he’ll revisit the issue, but has made no promises of fast action. A host of technologies wait for word of whether they will have longer term tax incentives, including geothermal, biomass, hydropower, combined heat and power, microturbines, fuel cells, small wind, landfill gas, municipal solid waste, waste-heat-to-power, and marine hydrokinetic.

“I expect it will not be easy to fix as some appear to suggest, and that for the sake of having a future industry we will need to work hard to secure a level playing field in tax incentives,” said Karl Gawell, GEA’s Executive Director. “We need the community to galvanize behind us to get this done as quickly as possible,” he added.